Bob Co. has two departments: QR, and XY, which produce high quality hockey sticks. The company has provide the following information for the month of April: QR Sales $ Variable Costs Contribution Margin Fixed Expenses Operating Income (Loss) 9,000,000 $ 4,500,000 4,500,000 3,500,000 1,000,000 - XY 2,200,000 $ 950,000 1,250,000 1,300,000 50,000 Total 11,200,000 5,450,000 5,750,000 4,800,000 950,000 Bob Co. has conducted an analysis of the costs involving XY after a poor performance in April and it was determined that the following would occur if the XY department ceased operations: 1. $450,000 in fixed expenses of XY would be eliminated by ceasing operations. The remaining $850,000 are sunk costs that cannot be recovered. 2. The sales in the QR department would increase 13% if XY were to cease operations. REQUIRED A) What would be the effect on operating income if the XY product line is dropped? B) Should the XY product line be dropped? Briefly explain. C) Unrelated to parts A & B of this question, Bob Co. is considering using the excess wood used in the production of their hockey sticks to create shooting targets. Currently, the company sells the additional wood for $6 per kilogram. If processed into shooting targets, it would cost an additional $5 per unit to process and would use 2kg of wood to create. These shooting targets could sell for $25 per target. Currently, the company has 1,000 kilograms of wood that they sell. Should Bob make these new shooting targets